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For the holiday week ending July 4, chicken slaughter fell 3% below the year prior, and left the six-week slaughter total down 4.1%. Persistently heavier birds across most weeks has left the six-week RTC production total just 1.2% below year ago. Weekly hatchery data suggests bird availability should begin to increase into late summer. Chicken prices have been mixed recently, with the front half of the bird finding support while the back half continues to struggle. The tender market has been on the rise but remains well back of year ago levels. Wings, as well have been on the rise, but recent COVID related restaurant setbacks may keep a lid on any upside in the near-term.
While last week’s slaughter schedule moved just 0.9% over year ago, heavier carcasses pushed beef production 4.2% over the same week last year. Elevated beef production continues to pressure the cutouts, but modest firmness is being noted across the end meats while the middles continue to slide. Spot beef sales have been active, and, beyond active fill-in buying, retail outlets may be in the process of putting together aggressive retail beef ads as wholesale prices are attractive. Beef 50s continue to struggle as heavier carcasses add additional fat trim to the marketing mix. Beef 50’s could remain attractive.
Hog harvests remain well over year ago levels, up 7.7% last week, leaving year to date slaughter even with 2019. Larger production schedules are keeping pressure on the pork cutout, but ham and belly prices have started to increase. The weekly average belly price remained below $1.00 but daily trade through the back half of last week left the primal belly at or above that level. Seasonally, there may be some upside in store for the bellies, but larger production schedules are expected to keep pressure on the majority of the carcass.
The salmon markets continue to track below prior year levels due in a large part to lethargic demand. U.S. salmon imports during May were up 3.9% from the prior year with farmed filet trade up 8%. Fairly solid salmon imports are anticipated to persevere into the fall. This factor and lackluster food service demand are expected to weigh on salmon prices. But the market downside is likely minimal.
The potato markets have firmed during the last month with Idaho potato prices tracking at their most expensive levels since March. Potato supplies are seasonally light. However, lackluster food service demand is tempering the upside in the markets. The USDA is estimating 2020 U.S. potato acreage at 921 thousand which is 4.9 percent less than the previous year and the smallest since at least 1929. This could temper any seasonal downside in potato prices this fall. The avocado markets continue to decline.
THE KITCHEN SINK
The cheese block market last week hit a record high, but the cheese barrel market finished modestly lower (w/w). Government dairy product buying for their food box program and decent retail cheese purchasing has supported prices. Still, U.S. cheese exports are decelerating rapidly due to much cheaper global prices. And, less costly milk is now being purchased by cheese producers which should eventually weigh heavy on cheese prices. Anticipate a market top and notable counter seasonal price weakness for cheese in the not-so-distant future. Spot butter prices are the lowest for this time of year in since 2013.
The USDA released their latest crop estimates on Friday showing the 2020 domestic wheat harvest at 1.8 billion bushels, down 5% from last year. Still, all classes of wheat supplies are expected to remain close to year ago levels. Unless there is a major crop shortfall elsewhere, the upside in wheat prices may be limited.
Last week retail diesel fuel (ultra-low) prices were the highest in 10 weeks but still 19.9% lower than a year ago. The U.S. economy, though improving, is still lagging due to regional shutdowns. But the longer-term risk in fuel prices is likely to the upside.